Eric Olsen Executive Director HELPS nonprofit law firm. www.helpsishere.org
Sometimes seniors with lower incomes find themselves owing past due income taxes. Taxes they can’t afford to pay. As the Executive Director of HELPS, a 501 c nonprofit law firm that assist seniors with debt problems, I regularly talk with seniors distressed about past due taxes owed. Seniors want to pay their taxes, but sometimes there simply is insufficient income. Seniors need to know that laws and regulations have been enacted to assist persons with lower incomes to protect them from tax collection.
Most seniors don’t understand that social security, pensions, VA benefits and other forms of retirement income are protected by federal law. This income cannot be garnished for old debts such as credit cards or past due loans. An exception is the IRS occasionally will garnish 15% of a senior’s social security for past due taxes. However this will not happen without the senior being first notified. Steps can be taken to prevent a garnishment by the IRS.
For seniors that can afford to pay their taxes if the sum is less than $50,000 they can arrange for monthly payments over five years almost automatically. Lower income seniors can often be placed on uncollectable status with the IRS and pay nothing. An existing garnishment by the IRS can even be stopped. Seniors can apply for uncollectable status with the IRS over the phone or online. The IRS website provides budget guidelines to qualify for uncollectable status. These budget guidelines are not normally volunteered when applying for uncollectable status with the IRS. If you say you can pay something each month, the IRS will gladly take your money. Many lower income seniors underestimate their needs and pay a monthly payment they can’t afford to the IRS because they think they have to pay something. When according to IRS budget guidelines they could pay nothing.
Almost all seniors don’t realize that their local state tax collector cannot garnish social security and retirement income for past due state income taxes. Even when this money is deposited into a bank account, as long as it is traceable to social security and pension income it is exempt. If an account is garnished a claim of exemption can be filed for the money to be returned. State taxing agencies unfortunately will never tell seniors their income is protected. Instead they often will badger and intimidate in order to collect from seniors who don’t know their rights. If a state tax collector calls, a lower income senior can simply advise his income is federally protected social security, pension, VA benefits, or disability and they can’t afford to pay the tax.
Sometimes seniors are worried when they receive a “tax lien.” Language in the written lien notice makes them worry they are going to lose their home, car and other possessions. Tax collectors are not in the business of selling peoples homes. It just doesn’t happen in real life. Many seniors have little or no equity in a home for a lien to attach anyway. The taxing agency files the lien and hopes the tax gets paid if and when the home is sold. Tax collectors do not go after personal possessions, especially persons with lower incomes.
Bankruptcy is generally unnecessary for lower income seniors because their income is already protected. However taxes often can be eliminated through bankruptcy. The general rule is that the tax must be over three years old and have been assessed for at least two years in order to be eliminated through bankruptcy.
Certainly we should strive to pay our taxes. However laws and procedures are in place protecting lower income and poor seniors from tax collection. America wants seniors to have the food and medicines they need. If there is a choice between basics and paying taxes, seniors can take steps to stop tax collection action. Seniors income is in almost all instances protected and available for their needs.